Open Letter To Peter Schiff - CoinAxis

Open letter to Peter Schiff

Stefan Molyneux recently did an interview you, allowing you to further explain your negative comments regarding bitcoin. Peter, it seems you don't fully understand what bitcoin is, and/or what the current value & future potential holds. I hope that your rehearsed argument for bitcoin, is not solely because your financial brokerage business, needs to maintain the monetary status quo in order for it to flourish, as most of your recommendations are a hedge on poor monetary policy. Full disclosure, as I and family members are/have been clients of Euro Pacific.

I want to address some of the points you made during your interview with Stefan Molyneux, with my questions & responses included.

Peter: (bitcoin) It's not backed by anything

Michael: A currency that is backed by a commodity cannot survive long term because of the nature of government. If you can provide an example otherwise, please do so. Your wish to have a currency backed by gold (or other commodity) is noble rhetoric; however, if you anticipate the government being involved (which they will) then you must conclude, that history would dictate that this is not a likely, or viable scenario. Only gold & silver coins, circulating unfettered from banks & government could survive.

Peter: Bitcoin doesn't have intrinsic value

Michael: Can you answer these questions:

Is the majority of gold, and silver held in a central location(s) (warehouses, vaults, etc...)?

Is there a counter party risk to holding paper gold & silver?

Is gold/silver easier to confiscate than bitcoin?

Are bank deposits easier to confiscate than bitcoin?

Is it easier to transport your gold/silver or bitcoin across borders?

Is there value in a currency, or store of value that is very difficult, if not impossible for governments to confiscate?

in·trin·sic

adjective\in-ˈtrin-zik, -ˈtrin(t)-sik\

: belonging to the essential nature of a thing : occurring as a natural part of something

The essential nature of bitcoin is that it's private, divisible, portable, and secure. Just because you can't hold it in your hand, does not remove the inherent value in today's climate.

Peter: Bitcoin is a pyramid scheme

Michael: If you consider bitcoin to be a pyramid scheme, you'd then have to classify every business traded on the stock exchange as a pyramid scheme. Google's goal is to gain more shareholders of a fixed amount of Google stock. More demand from a scarce amount of shares, means higher prices. Take this one step further, bitcoin is not a corporation, it's a payment system & currency rolled into one.

Peter: There is no barrier to entry

Michael: Please tell me you don't mean this. For someone that promotes a free market without government intervention, this statement will have fellow Austrian free-marketeers stuffing their eyes back into their heads. Competition, and choice is a good thing. Does it really matter if 80+ alternative crypto-currencies have sprung up in bitcoins wake? Coins such as Litecoin have highly distinguishable technical differences. As such, litecoin has taken the second position behind bitcoin. The majority of other crypto-currencies sputter along, hoping they have what it takes to picked by the free market. The vast majority of these will, and have failed, because of the free market.

Peter: What about a bank that backs its digital currency with gold?

Michael: This already happened with e-gold, and was promptly shut down by the government. You're making an assumption that such a bank will be created, and be allowed to operate without being overburdened with regulation, and massive risk. This type of banking institution would be a single point of failure in your digital/gold money idea. Not to mention, it does not exist. Speculation about a nebulous fantasy bank, that could be better than bitcoin, doesn't actually count as a current argument against bitcoin.

Peter: They can make it illegal to own bitcoin

Michael: Sure, the United States can make it illegal to own bitcoin, and that can have an effect on US based businesses accepting bitcoin. However, individuals could still do peer-to-peer transactions anonymously. Not to mention the rest of the world would continue to function, and use bitcoin freely.

Conclusion

Currently bitcoin is sitting directly in its infancy, much like the internet in 1990. Consider the internet is a technology that is measured on the amount of users. This can be translated into bitcoin, except bitcoin is a store of value. You claim the price is in a bubble, yet you don't consider that bitcoin is a new technological currency that started at zero. Each new user (owner) holds bitcoins at the value they acquire them. Where will the price for bitcoin settle? Nobody knows for certain; however, it's conceivable if bitcoin reached 500 million users in the next 2-3 years, the price will be exponentially higher than $900.

I would request that you take the time to study, and fully understand bitcoin before you make naive statements about it. I have the utmost respect for you, and the voice you provide in our failed monetary ecosystem, but I feel you're falling short on this subject. I don't see anyone in the bitcoin community saying: "put all your money into bitcoin", in fact, most people in the community will say diversify while holding hard assets.

We in the bitcoin community entertain the notion that bitcoin will not work or be viable in the future. But, having that knowledge does not prevent the current value & potential that bitcoin provides. Most of us are exercising due diligence, at the same time are very excited about this new possibility. The market is powered by greed and fear. This includes investing in gold & silver. But one thing is for certain, bitcoin WOULD NOT be necessary, if it wasn’t for the effects of central banking, fiat money, debt, gold centralization/confiscation, market manipulation, banking bailouts, etc… Bitcoin was created as a result of these things. The market is trying to solve a problem that the financial system & governments have created. Your solutions are still part of the problem. If central banks are eliminated, and we have nothing but honest gold/silver backed money, then bitcoin isn't as necessary. But, given the current state we are in, and the trajectory path we are on, I don't see things getting better anytime soon.